<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)
   [X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

   [ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934

            FOR THE TRANSITION PERIOD FROM ___________ TO ___________


                        COMMISSION FILE NUMBER: 000-19580

                            T-3 ENERGY SERVICES, INC.
             (Exact Name of Registrant as Specified in Its Charter)

           DELAWARE                                          76-0697390
  (State or Other Jurisdiction                              (IRS Employer
of Incorporation or Organization)                         Identification No.)

13111 NORTHWEST FREEWAY, SUITE 500, HOUSTON, TEXAS              77040
   (Address of Principal Executive Offices)                   (Zip Code)

      (Registrant's telephone number, including area code): (713) 996-4110




     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     At August 13, 2002, the registrant had 10,581,669 shares of common stock
outstanding.


                                       1




<PAGE>



                                TABLE OF CONTENTS

                                    FORM 10-Q


                                     PART I

Item                                                                   Page
-----                                                                  ----

1. Financial Statements ..............................................   3

       Consolidated Balance Sheets as of June 30, 2002 and
       December 31, 2001 .............................................   3

       Consolidated Statements of Operations for the Three and
       Six Months Ended June 30, 2002 and 2001 .......................   4

       Consolidated Statements of Cash Flows for the Six Months
       Ended June 30, 2002 and 2001 ..................................   5

       Notes to Consolidated Financial Statements ....................   6

2. Management's Discussion and Analysis of Financial Condition and
   Results of Operations .............................................  10

3. Quantitative and Qualitative Disclosures about Market Risk ........  18


                                     PART II

1. Legal Proceedings .................................................  19

2. Changes in Securities and Use of Proceeds .........................  19

3. Defaults Upon Senior Securities ...................................  19

4. Submission of Matters to a Vote of Security Holders ...............  19

5. Other Information .................................................  19

6. Exhibits and Reports on Form 8-K ..................................  19






                                       2
<PAGE>



                   T-3 ENERGY SERVICES, INC., AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                     (IN THOUSANDS EXCEPT FOR SHARE AMOUNTS)

<Table>
<Caption>
                                                                                JUNE 30,            DECEMBER 31,
                                                                                  2002                 2001
                                                                                  ----                 ----
                                                                               (UNAUDITED)
<S>                                                                             <C>                  <C>
                                 ASSETS
Current assets:
Cash and cash equivalents.........................................              $    2,226           $    5,395
Accounts receivable - trade, net..................................                  24,425               29,158
Inventories, net..................................................                  18,197               19,225
Notes receivable, current portion.................................                     431                  161
Deferred income taxes.............................................                   4,130                4,673
Prepaids and other current assets.................................                   4,150                3,892
                                                                                ----------           ----------
     Total current assets.........................................                  53,559               62,504

Property and equipment, net.......................................                  27,965               27,233
Notes receivable, less current portion............................                   5,704                5,873
Goodwill, net.....................................................                  98,345               98,498
Other intangible assets, net......................................                   4,233                5,060
Other assets......................................................                     578                  560
                                                                                ----------           ----------

Total assets......................................................              $  190,384           $  199,728
                                                                                ==========           ==========

                  LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade..........................................              $   11,031           $   16,229
Accrued expenses and other........................................                   9,198               12,115
Current maturities of long-term debt..............................                   4,382                5,307
                                                                                ----------           ----------
     Total current liabilities....................................                  24,611               33,651

Long-term debt, less current maturities...........................                  31,300               43,897
Other long-term liabilities.......................................                   1,441                2,455
Deferred income taxes.............................................                   4,280                3,695

Commitments and contingencies

Stockholders' equity:
     Preferred stock, $.001 par value, 25,000,000 shares
        authorized, no shares issued or outstanding...............                     ---                  ---
     Common stock, $.001 par value, 50,000,000 shares authorized,
        10,581,669 and 9,581,669 shares issued and outstanding at
        June 30, 2002 and December 31, 2001 ......................                      11                   10
     Warrants, 3,486,217 issued and outstanding  .................                     938                  938
     Additional paid-in capital...................................                 122,837              112,825
     Retained earnings............................................                   4,966                2,257
                                                                                ----------           ----------
        Total stockholders' equity................................                 128,752              116,030
                                                                                ----------           ----------

Total liabilities and stockholders' equity........................              $  190,384           $  199,728
                                                                                ==========           ==========

</Table>

     The accompanying notes are an integral part of these consolidated financial
statements.


                                       3
<PAGE>


                   T-3 ENERGY SERVICES, INC., AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                     (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)


<Table>
<Caption>
                                                               THREE MONTHS                  SIX MONTHS
                                                               ENDED JUNE 30,               ENDED JUNE 30,
                                                             2002          2001          2002           2001
                                                             ----          ----          ----           ----
<S>                                                        <C>            <C>           <C>           <C>
Sales:
    Products.....................................          $  28,753      $  16,981     $  56,699     $  25,608
    Services.....................................              8,483          5,134        16,947         9,899
                                                           ---------      ---------     ---------     ---------
                                                              37,236         22,115        73,646        35,507
Cost of sales:
    Products.....................................             20,534         11,544        41,028        16,831
    Services.....................................              5,625          3,272        10,855         6,544
                                                           ---------      ---------     ---------     ---------
                                                              26,159         14,816        51,883        23,375

Gross profit.....................................             11,077          7,299        21,763        12,132

Selling, general and administrative expenses.....              7,985          4,631        15,669         7,557
                                                           ---------      ---------     ---------     ---------

Income from operations...........................              3,092          2,668         6,094         4,575

Interest expense.................................                871          1,240         1,851         2,241

Interest income..................................                171             --           351             1

Other (income) expense, net......................                (29)             2           (40)           --
                                                           ----------     ---------     ----------    ---------

Income before provision for income taxes.........              2,421          1,426         4,634         2,335

Provision for income taxes.......................              1,019            710         1,925         1,162
                                                           ---------      ---------     ---------     ---------

Net income.......................................          $   1,402      $     716     $   2,709     $   1,173
                                                           =========      =========     =========     =========

Earnings per share:
    Basic........................................          $     .13      $     .36     $     .27     $     .59
                                                           =========      =========     =========     =========
    Diluted......................................          $     .13      $     .28     $     .27     $     .50
                                                           =========      =========     =========     =========

Weighted average common shares outstanding:
    Basic........................................             10,582          1,980        10,107         1,976
                                                           =========      =========     =========     =========
    Diluted......................................             10,582          3,425        10,107         3,096
                                                           =========      =========     =========     =========
</Table>

     The accompanying notes are an integral part of these consolidated financial
statements.



                                       4
<PAGE>

                   T-3 ENERGY SERVICES, INC., AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (IN THOUSANDS)

<Table>
<Caption>
                                                                                              SIX MONTHS
                                                                                            ENDED JUNE 30,
                                                                                        2002             2001
                                                                                        ----             ----
<S>                                                                                   <C>             <C>
Cash flows from operating activities:
Net income.................................................................           $    2,709      $    1,173
Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation and amortization.........................................                1,857           1,898
     Amortization of deferred loan costs...................................                  422              77
     Deferred taxes........................................................                  910              82
     Amortization of stock compensation....................................                   13              22
   Changes in assets and liabilities, net of effect of purchase acquisitions:
       Accounts receivable - trade, net....................................                4,701          (2,648)
       Inventories, net....................................................                  930          (1,990)
       Prepaids and other current assets...................................                 (148)           (375)
       Notes receivable....................................................                 (101)             --
       Other assets........................................................                  (18)           (644)
       Accounts payable - trade............................................               (5,261)          1,941
       Accrued expenses and other..........................................               (3,608)          1,290
                                                                                      -----------     ----------

Net cash provided by operating activities..................................                2,406             826
                                                                                      ----------      ----------

Cash flows from investing activities:
   Purchases of property and equipment.....................................               (2,142)         (1,855)
   Proceeds from sales of property and equipment...........................                   95              56
   Cash consideration paid for acquisitions, net of cash acquired..........                   --         (15,300)
                                                                                      ----------      -----------

Net cash used in investing activities......................................               (2,047)        (17,099)
                                                                                      ----------      ----------

Cash flows from financing activities:
    Proceeds from long-term debt...........................................                  394          15,915
    Net borrowings (repayments) under revolving credit facility............              (10,748)          1,575
    Payments on long-term debt.............................................               (3,168)           (718)
    Debt financing costs...................................................                   (6)           (116)
    Proceeds from sales of common stock....................................               10,000             140
                                                                                      ----------      ----------

Net cash provided by (used in) financing activities........................               (3,528)         16,796
                                                                                      -----------     ----------

Net decrease in cash and cash equivalents..................................               (3,169)            523
Cash and cash equivalents, beginning of period.............................                5,395           1,168
                                                                                      ----------      ----------
Cash and cash equivalents, end of period...................................           $    2,226      $    1,691
                                                                                      ==========      ==========

Supplemental disclosure of cash flow information:
    Cash paid during the period for:
        Interest...........................................................           $    1,255      $    1,251
                                                                                      ==========      ==========
        Income taxes.......................................................           $    2,277      $      290
                                                                                      ==========      ==========
</Table>

     The accompanying notes are an integral part of these consolidated financial
statements.

                                       5
<PAGE>

                   T-3 ENERGY SERVICES, INC., AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.   ORGANIZATION AND BASIS OF PRESENTATION

     T-3 Energy Services, Inc. ("T-3") was incorporated in October 1999, but did
not engage in business activities until the acquisition of Cor-Val, Inc. on
February 29, 2000. Additionally, T-3 acquired O&M Equipment, Inc. and Preferred
Industries, Inc. in April 2000, Control Products of Louisiana, Inc. in September
2000, Coastal Electric Motors, Inc. in December 2000 and A&B Bolt and Supply,
Inc. in May 2001. The results of operations for these acquisitions are included
in the operating results for T-3 from their respective dates of acquisition. On
December 17, 2001, T-3 merged into Industrial Holdings, Inc. ("IHI") with IHI
surviving the merger under the name T-3 Energy Services, Inc. ("the Company").
The merger was treated for accounting purposes as if IHI was acquired by T-3 (a
reverse acquisition) in a purchase business transaction. The purchase method of
accounting required that the Company carry forward T-3's net assets at their
historical book values and reflect IHI's net assets at their estimated fair
values at the date of the merger. Accordingly, the historical operating results
presented herein include the historical operating results of T-3 prior to its
merger with IHI. The results of operations for IHI are included in the operating
results for T-3 from the date of merger. In connection with the merger at
December 17, 2001, the Company implemented a one-for-ten reverse stock split of
its common stock and common stock underlying existing warrants. Accordingly, all
share amounts presented in this report have been restated to reflect this stock
split.

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for fair presentation have been included.
These financial statements include the accounts of T-3 Energy Services, Inc.,
and subsidiaries. All significant intercompany balances and transactions have
been eliminated in consolidation. Operating results for the three and six months
ended June 30, 2002, are not necessarily indicative of the results that may be
expected for the year ended December 31, 2002. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 2001.
Certain amounts have been reclassified from previous periods to conform to the
current presentation.

2.   PRO FORMA INFORMATION

     If the 2001 purchase business combinations described in Note 1 had occurred
on January 1, 2001, pro forma unaudited sales, net income and basic and diluted
net income per share would have been $93.8 million, $4.9 million, and $0.52 and
$0.51 for the six months ended June 30, 2001. The pro forma financial
information does not purport to be indicative of results of operations that
would have occurred had the purchases been made at January 1, 2001.



                                       6
<PAGE>


                   T-3 ENERGY SERVICES, INC., AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                   (CONTINUED)

3.   INVENTORIES

     Inventories consist of the following (dollars in thousands):
<Table>
<Caption>

                                                                     JUNE 30,        DECEMBER 31,
                                                                       2002             2001
                                                                    --------------    ---------
                                                                      (UNAUDITED)
<S>                                                                 <C>               <C>
             Raw materials...................................       $  4,374          $  4,995
             Work in process.................................          3,276             3,029
             Finished goods and component parts..............         10,547            11,201
                                                                    --------          --------
                                                                    $ 18,197          $ 19,225
                                                                    ========          ========
</Table>

4.   NEWLY ISSUED ACCOUNTING STANDARDS

     On June 29, 2001, Statements of Financial Accounting Standards ("SFAS") No.
141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets" were approved by the Financial Accounting Standards Board ("FASB"). SFAS
No. 141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. Goodwill and certain other
intangible assets with indefinite lives will remain on the balance sheet and not
be amortized. On an annual basis, and when there is reason to suspect that their
values have been diminished or impaired, these assets must be tested for
impairment and write-downs may be necessary. The Company implemented SFAS No.
141 on July 1, 2001. The adoption of this standard had no effect on the
Company's consolidated financial position or results of operations. SFAS No. 142
changes the accounting for goodwill from an amortization method to an
impairment-only approach. Amortization of goodwill, including goodwill recorded
in past business combinations, ceased upon adoption of this statement. The
Company was required to implement SFAS No. 142 on January 1, 2002 and as a
result, the Company will not amortize approximately $98 million of goodwill. The
Company had recorded approximately $0.6 million and $0.9 million of goodwill
amortization during the three and six months ended June 30, 2001 for
acquisitions that occurred prior to July 1, 2001. In lieu of amortization, the
Company is required to perform an initial impairment review of goodwill pursuant
to SFAS No.142 no later than June 30, 2002 and an annual impairment review
thereafter. Management completed the initial review during the second quarter of
2002 and no impairment charge was necessary as of the January 1, 2002 valuation.

     During the third quarter of 2001, the FASB issued SFAS No. 143, "Accounting
for Asset Retirement Obligations". SFAS No. 143 covers all legally enforceable
obligations associated with the retirement of tangible long-lived assets and
provides the accounting and reporting requirements for such obligations. SFAS
No. 143 is effective for the Company beginning January 1, 2003. Management
believes that the adoption of SFAS No. 143 will not have a significant impact on
the Company's consolidated financial position or results of operations.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which is effective for the Company
beginning January 1, 2002. SFAS No. 144 supersedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of", and the accounting and reporting provisions relating to the disposal of a
segment of a business of Accounting Principles Board Opinion No. 30. The Company
implemented SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 did
not have a material impact on the Company's consolidated financial position or
results of operations.

     In April 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses from
Extinguishment of Debt". As a result, the criteria in Accounting Principles
Board Opinion (APB) No. 30, "Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," will now be used to classify those gains and losses. SFAS No. 64,
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements," amended
SFAS No. 4, and is no longer


                                       7
<PAGE>

                   T-3 ENERGY SERVICES, INC., AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                   (CONTINUED)

necessary because SFAS No. 4 has been rescinded. SFAS No. 145 amends SFAS No.
13, "Accounting for Leases," to require that certain lease modifications that
have economic effects similar to sale-leaseback transactions be accounted for in
the same manner as sale-leaseback transactions. The provisions of SFAS No. 145
are effective for fiscal years beginning after May 15, 2002. Early application
of SFAS No. 145 is encouraged. There will be no material impact on the Company's
consolidated balance sheets or consolidated statements of operations upon
adoption of SFAS No. 145.

5.   EARNINGS PER SHARE

     Basic net income per common share is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
net income per common share is the same as basic but assumes the exercise of
convertible subordinated debt securities and includes dilutive stock options and
warrants using the treasury stock method.

     The following table reconciles the numerators and denominators of the basic
and diluted per common share computations for net income for the three and six
months ended June 30, 2002 and 2001, as follows (in thousands except per share
data):

<Table>
<Caption>
                                                                                    (UNAUDITED)
                                                                                    THREE MONTHS
                                                                                    ENDED JUNE 30,
                                                                                 2002           2001
                                                                             -----------    --------
<S>                                                                           <C>            <C>
      Numerator:
         Net income...................................................        $   1,402      $     716
         Interest on convertible debt, net of tax.....................               --            258
                                                                              ---------      ---------
         Net income before interest on convertible debt...............        $   1,402      $     974
                                                                              =========      =========

      Denominator:
         Weighted average common shares outstanding -- basic..........           10,582          1,980
         Shares for convertible debt..................................               --          1,422
         Shares for dilutive stock options............................               --             23
                                                                              ---------      ---------
         Weighted average common shares outstanding and
           Assumed conversions -- diluted.............................           10,582          3,425
                                                                              =========      =========

      Basic earnings per common share ................................        $     .13      $     .36
      Diluted earnings per common share ..............................        $     .13      $     .28
</Table>

<Table>
<Caption>

                                                                                    (UNAUDITED)
                                                                                    SIX MONTHS
                                                                                  ENDED JUNE 30,
                                                                                 2002           2001
                                                                             -----------    --------
<S>                                                                           <C>            <C>
      Numerator:
         Net income...................................................        $   2,709      $   1,173
         Interest on convertible debt, net of tax.....................               --            378
                                                                              ---------      ---------
         Net income before interest on convertible debt...............        $   2,709      $   1,551
                                                                              =========      =========

      Denominator:
         Weighted average common shares outstanding -- basic..........           10,107          1,976
         Shares for convertible debt..................................               --          1,108
         Shares for dilutive stock options............................               --             12
                                                                              ---------      ---------
         Weighted average common shares outstanding and
           Assumed conversions -- diluted.............................           10,107          3,096
                                                                              =========      =========

      Basic earnings per common share ................................        $     .27      $     .59
      Diluted earnings per common share ..............................        $     .27      $     .50
</Table>


     For 2002, there were 525,779 options and 3,486,217 warrants that were not
included in the computation of diluted earnings per share because their
inclusion would have been anti-dilutive. For the three months and six



                                       8
<PAGE>

                   T-3 ENERGY SERVICES, INC., AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                   (CONTINUED)

months ended June 30, 2001, there were 4,316 and 9,397 options, respectively,
that were not included in the computation of diluted earnings per share because
their inclusion would have been anti-dilutive.

6.   REPORTABLE SEGMENTS:

     The Company's determination of reportable segments considers the strategic
operating units under which the Company sells various types of products and
services to various customers. Financial information for purchase transactions
is included in the segment disclosures only for periods subsequent to the dates
of acquisition.

     The accounting policies of the segments are the same as those of the
Company. The Company evaluates performance based on income from operations
excluding certain corporate costs not allocated to the segments. Inter-segment
sales are not material. Substantially all sales are from domestic sources and
all assets are held in the United States. Segment information for the three and
six months ended June 30, 2002 and 2001 is as follows:

<Table>
<Caption>

                                                                (DOLLARS IN THOUSANDS)
                                                                     (UNAUDITED)
                                           PRESSURE
                                           CONTROL     PRODUCTS     DISTRIBUTION  CORPORATE     CONSOLIDATED
                                           --------    --------     ------------  ---------     ------------
<S>                                      <C>          <C>            <C>          <C>            <C>
THREE MONTHS ENDED JUNE 30:
             2002
Sales ...............................    $  17,770    $  10,534      $  8,932     $     --       $  37,236
Depreciation and amortization........          487          239            79           99             904
Income (loss) from operations........        3,665          203           438       (1,214)          3,092
Capital expenditures.................          513          202            80          397           1,192
             2001
Sales ...............................    $  12,469    $   1,458      $  8,188     $     --       $  22,115
Depreciation and amortization........          816           70            95           41           1,022
Income (loss) from operations........        2,568            3           665         (568)          2,668
Capital expenditures.................          424           55            94          193             766

SIX MONTHS ENDED JUNE 30:
             2002
Sales ...............................    $  34,234    $  20,956      $ 18,456     $     --       $  73,646
Depreciation and amortization........        1,043          464           169          181           1,857
Income (loss) from operations........        6,674          680         1,073       (2,333)          6,094
Capital expenditures.................          714          505            89          834           2,142
             2001
Sales ...............................    $  24,468    $   2,851      $  8,188     $     --       $  35,507
Depreciation and amortization........        1,597          131            95           75           1,898
Income (loss) from operations........        4,937           41           665       (1,068)          4,575
Capital expenditures.................        1,234          172            94          355           1,855

</Table>


7.   STOCKHOLDERS' EQUITY

     On March 27, 2002, the Company sold 1,000,000 shares of its common stock at
$10 per share to its largest stockholder, First Reserve Fund VIII. The proceeds
were used to fund working capital and reduce bank debt.





                                       9
<PAGE>




ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

GENERAL

     The following discussion of the Company's historical results of operations
and financial condition should be read in conjunction with the consolidated
financial statements and related notes included elsewhere in this Form 10-Q.

     On May 7, 2001, simultaneous with the signing of the merger agreement with
IHI, the Company acquired A&B Bolt, a subsidiary of IHI, for $15.3 million in
cash including merger expenses in a transaction accounted for using the purchase
method of accounting. The results of operations of A&B Bolt have been included
in the Company's operating results from the date of acquisition.

     On December 17, 2001, T-3 Energy Services, Inc., a private Delaware
corporation ("Former T-3"), merged into IHI, with IHI surviving the merger. In
connection with the merger, the combined Company was reincorporated in Delaware
under the name "T-3 Energy Services, Inc." and implemented a one-for-ten reverse
stock split of its common stock, including common stock underlying existing
options and warrants. The merger was treated for accounting purposes as a
purchase of IHI by Former T-3 (a reverse acquisition) in a purchase business
transaction. The purchase method of accounting requires that the Company carry
forward Former T-3's net assets at their historical book values and reflect
IHI's net assets at their estimated fair market values, with any excess of the
fair market value of the purchase consideration in excess of the fair market
value of IHI's identifiable net assets treated as goodwill. The historical
financial data presented in this Form 10-Q includes the historical financial
condition and operating results of Former T-3 prior to its merger with IHI. The
operating results of IHI are included in the operating results of T-3 from the
date of merger.

     The Company operates in three segments. The Pressure Control segment
manufactures, remanufactures and repairs high pressure, severe service products,
including valves, chokes, actuators, blowout preventers, manifolds and wellhead
equipment. The Products segment manufactures and repairs pumps, electric motors
and generators, manufactures specialty bolts and fasteners, fabricates equipment
and components for use in the exploration and production of oil and gas and
provides specialty machining for the repair and remanufacture of natural gas and
diesel engines. The Distribution segment engages in the specialty distribution
of pipes, valves, stud bolts, gaskets and other ancillary products. The
Company's products and services are sold primarily to customers in the upstream
and downstream oil and gas industry located in the Texas and Louisiana Gulf
Coast region.

     Demand for the Company's products and services is dependent upon the oil
and gas industry and the level of oil and gas exploration and production. The
level of exploration and production is dependent on current and projected oil
and natural gas prices. During the first half of 2001, oil and natural gas
prices increased over 2000 levels and the rig count increased both in the United
States and worldwide. However, in the second half of 2001 and continuing through
the first quarter of 2002, natural gas prices declined and North American and
worldwide rig counts decreased while oil prices were volatile throughout that
same time period. Natural gas prices began to rise somewhat late in the second
quarter of 2002. In addition, the North American drilling rig count stabilized
in the second quarter and has increased subsequent to June 30, 2002. Because of
these factors, the Company has experienced sales declines in the second half of
2001 that continued through the first quarter of 2002, with sales remaining flat
during the second quarter of 2002. Management believes that continuing price
uncertainty will impact near-term activity levels, but is optimistic, given the
most recent trends in prices and North American drilling rig counts, that an
upswing in activity may occur in the latter half of the year.






                                       10
<PAGE>


RESULTS OF OPERATIONS OF T-3

     The following table sets forth certain operating statement data for each of
the Company's segments for each of the periods presented (in thousands):

<Table>
<Caption>

                                                            THREE MONTHS                       SIX MONTHS
                                                            ENDED JUNE 30,                    ENDED JUNE 30,
                                                        2002             2001            2002             2001
                                                        ----             ----            ----             ----
<S>                                                   <C>              <C>             <C>             <C>
Sales:
     Pressure Control..........................       $   17,770       $   12,469      $   34,234      $   24,468
     Products..................................           10,534            1,458          20,956           2,851
     Distribution..............................            8,932            8,188          18,456           8,188
                                                      ----------       ----------      ----------      ----------

                                                          37,236           22,115          73,646          35,507
                                                      ----------       ----------      ----------      ----------
Cost of sales:
     Pressure Control..........................           11,189            7,678          21,778          15,184
     Products..................................            8,523            1,157          16,883           2,210
     Distribution..............................            6,447            5,981          13,222           5,981
                                                      ----------       ----------      ----------      ----------

                                                          26,159           14,816          51,883          23,375
                                                      ----------       ----------      ----------      ----------
Gross profit:
     Pressure Control..........................            6,581            4,791          12,456           9,284
     Products..................................            2,011              301           4,073             641
     Distribution..............................            2,485            2,207           5,234           2,207
                                                      ----------       ----------      ----------      ----------

                                                          11,077            7,299          21,763          12,132
                                                      ----------       ----------      ----------      ----------
Selling, general and administrative expenses:
     Pressure Control..........................            2,916            2,223           5,782           4,347
     Products..................................            1,808              298           3,393             600
     Distribution..............................            2,047            1,542           4,161           1,542
     Corporate.................................            1,214              568           2,333           1,068
                                                      ----------       ----------      ----------      ----------

                                                           7,985            4,631          15,669           7,557
                                                      ----------       ----------      ----------      ----------
Income (loss) from operations:
     Pressure Control..........................            3,665            2,568           6,674           4,937
     Products..................................              203                3             680              41
     Distribution..............................              438              665           1,073             665
     Corporate.................................           (1,214)            (568)         (2,333)         (1,068)
                                                      ----------       ----------      ----------      ----------

                                                      $    3,092       $    2,668      $    6,094      $    4,575
                                                      ==========       ==========      ==========      ==========
</Table>


Three Months ended June 30, 2002 Compared with Three Months ended June 30, 2001

     Sales. On a consolidated basis, sales increased $15.1 million, or 68%, in
2002 compared to 2001. Sales increased across all segments as a result of the
merger with IHI in December 2001 and the acquisition of A&B in May 2001.
However, as a result of declining gas prices and North American drilling rig
counts, on a pro forma basis as if the merger with IHI had occurred as of
January 1, 2001, sales for all operating units across all segments have
decreased for the three months ended June 30, 2002, compared to the three months
ended June 30, 2001.

     Sales for the Pressure Control segment increased $5.3 million, or 43%, in
2002 compared to 2001. The sales increase in 2002 over 2001 was attributable to
the merger with IHI in December 2001. However, on a pro forma basis as if the
merger with IHI had occurred as of January 1, 2001, sales for this segment
decreased for the three months ended June 30, 2002 compared to 2001.

                                       11
<PAGE>

     Sales for the Products segment increased $9.0 million, or 623%, in 2002
compared to 2001. This sales increase was attributable to the merger with IHI in
December 2001. However, on a pro forma basis as if the merger with IHI had
occurred as of January 1, 2001, sales for this segment decreased for the three
months ended June 30, 2002 compared to 2001.

     Sales for the Distribution segment were $8.9 million for 2002. The
Distribution segment was formed in May 2001 with the acquisition of A&B Bolt.
Sales for A&B Bolt were $12.1 million for the same quarter 2001. The 26%
decrease in sales (on a pro forma basis) from the second quarter of 2001 is
primarily due to the decline in North American drilling rig activity.

     Cost of Sales. On a consolidated basis, cost of sales increased $11.3
million, or 77%, in 2002 compared to 2001. Gross profit margin was 30% in 2002
compared to 33% in 2001. Gross profit margin was lower on a consolidated basis
in 2002 compared to 2001 because of a change in the mix of sales and, as sales
decreased, fixed costs did not decrease proportionally. The Pressure Control
segment, which typically has the highest margins of all of the segments,
represented a smaller percentage of total sales (48% in 2002 compared to 56% in
2001). The Products and Distribution segments, which typically have lower
margins than the Pressure Control segment, represented a larger percentage of
total sales (52% in 2002 compared to 44% in 2001).

     Cost of sales for the Pressure Control segment increased $3.5 million, or
46%, in 2002 compared to 2001, primarily as a result of the increase in sales
described above. Gross profit margin was 37% in 2002 compared to 38% in 2001.
Gross profit margin decreased primarily because as sales decreased, fixed costs
did not decrease proportionally.

     Cost of sales for the Products segment increased $7.4 million in 2002 from
$1.2 million in 2001, primarily as a result of the merger with IHI in December
2001. Gross profit margin was 19% in 2002 compared to 21% in 2001. Gross profit
margin decreased primarily because as sales decreased, fixed costs did not
decrease proportionally.

     Cost of sales for the Distribution segment was $6.4 million in 2002. Gross
profit margin was 28% in 2002. On a pro forma basis, A&B Bolt's gross profit
margin was 27% for the three months ended June 30, 2001.

     Selling, General and Administrative Expenses. On a consolidated basis,
selling, general and administrative expenses increased $3.4 million, or 72%, in
2002 compared to 2001, primarily as a result of the merger with IHI in December
2001. The increase was net of a decrease in the amortization of goodwill of $0.4
million. Selling, general and administrative expenses as a percentage of sales
were 21% for both 2002 and 2001.

     Selling, general and administrative expenses for the Pressure Control
segment increased $0.7 million, or 31%, in 2002 compared to 2001 primarily as a
result of the merger with IHI in December 2001. The increase was net of a
decrease in the amortization of goodwill of $0.4 million. As a percentage of
sales, selling, general and administrative expenses remained comparable at 16%
in 2002 and 18% in 2001.

     Selling, general and administrative expenses for the Products segment
increased $1.5 million, or 507%, in 2002 compared to 2001, primarily as a result
of the merger with IHI in December 2001. As a percentage of sales, selling,
general and administrative expenses decreased from 20% in 2001 to 17% in 2002.
In 2002, the combined operating units have lower selling, general and
administrative cost structures than in 2001.

     Selling, general and administrative expenses in the Distribution segment
were $2.0 million in 2002. Selling, general and administrative expenses were
$2.3 million for A&B Bolt in the same quarter 2001. However, as a percentage of
sales, selling, general and administrative expenses were 23% in 2002 compared to
19% in 2001. This increase is attributable to a decline in sales due to market
conditions while fixed costs remained relatively constant.

     Selling, general and administrative expenses for Corporate operations
increased $0.6 million, or 114%, in 2002 compared to 2001. This increase was
primarily attributable to the merger with IHI in December 2001 and the addition
of corporate staff and related expenses resulting from the Company's growth and
the costs associated with being a publicly traded company.

                                       12
<PAGE>

     Interest Expense. On a consolidated basis, interest expense decreased $0.4
million or 30% in 2002 compared to 2001. In connection with the merger with IHI
in December 2001, First Reserve Fund VIII converted $24 million in 12%
convertible notes to equity. Additionally, the Company completed a comprehensive
debt refinancing, lowering the Company's effective borrowing rate. On March 27,
2002, the Company sold 1,000,000 shares of its common stock at $10 per share to
its largest stockholder, First Reserve Fund VIII. The proceeds from this sale
were used to pay down debt.

     Interest Income. Interest income in 2002 was generated from seller notes
receivable that arose in conjunction with the disposal by IHI of several
business units just prior to the completion of the merger. Interest income in
2001 was not material.

     Income Taxes. Income tax expense for 2002 was $1.0 million compared to
$0.7 million in 2001. The effective tax rate for 2002 was 42% compared to 50% in
2001. For 2001, the tax rate in excess of the combined federal and state
statutory rates (approximately 39%) was primarily attributable to the
nondeductible portion of meals and entertainment expenses and the nondeductible
amortization of goodwill associated with the acquisitions made before July 1,
2001. However, as a result of the implementation of SFAS No. 142, beginning
January 1, 2002, the Company no longer amortizes goodwill. As a result, the
Company's effective tax rate decreased in 2002.

     Net Income. On a consolidated basis, net income was $1.4 million in 2002
compared with $0.7 million in 2001 as a result of the foregoing factors.

Six Months ended June 30, 2002 Compared with Six Months ended June 30, 2001

     Sales. On a consolidated basis, sales increased $38.1 million, or 107%, in
2002 compared to 2001. Sales increased across all segments as a result of the
merger with IHI in December 2001. However, as a result of declining gas prices
and North American drilling rig counts, on a pro forma basis as if the merger
with IHI had occurred as of January 1, 2001, sales for all operating units
across all segments have decreased for the six months ended June 30, 2002,
compared to the six months ended June 30, 2001.

     Sales for the Pressure Control segment increased $9.8 million, or 40%, in
2002 compared to 2001. The sales increase in 2002 over 2001 was attributable to
the merger with IHI in December 2001. However, on a pro forma basis as if the
merger with IHI had occurred as of January 1, 2001, sales for this segment
decreased for the six months ended June 30, 2002 compared to 2001.

     Sales for the Products segment increased $18.1 million, or 635%, in 2002
compared to 2001. This sales increase was attributable to the merger with IHI in
December 2001. However, on a pro forma basis as if the merger with IHI had
occurred as of January 1, 2001, sales for this segment decreased for the six
months ended June 30, 2002 compared to 2001.

     Sales for the Distribution segment were $18.5 million for 2002. The
Distribution segment was formed in May 2001 with the acquisition of A&B Bolt.
Sales for A&B Bolt were $22.4 million for the same six-month period in 2001. The
17% decrease in sales (on a pro forma basis) from 2001 is primarily due to the
decline in North American drilling rig activity.

     Cost of Sales. On a consolidated basis, cost of sales increased $28.5
million, or 122%, in 2002 compared to 2001. Gross profit margin was 30% in 2002
compared to 34% in 2001. Gross profit margin was lower on a consolidated basis
in 2002 compared to 2001 because of a change in the mix of sales and, as sales
have decreased, fixed costs have not decreased proportionally. The Pressure
Control segment, which typically has the highest margins of all of our segments,
represented a smaller percentage of total sales (46% in 2002 compared to 69% in
2001). The Products and Distribution segments, which typically have lower
margins than the Pressure Control segment, represented a larger percentage of
total sales (54% in 2002 compared to 31% in 2001).

                                       13
<PAGE>

     Cost of sales for the Pressure Control segment increased $6.6 million, or
43%, in 2002 compared to 2001, primarily as a result of the increase in sales
described above. Gross profit margin was 36% in 2002 compared to 38% in 2001.
Gross profit margin decreased primarily because as sales decreased, fixed costs
did not decrease proportionally.

     Cost of sales for the Products segment increased $14.7 million in 2002 from
$2.2 million in 2001, primarily as a result of the merger with IHI in December
2001. Gross profit margin was 19% in 2002 compared to 22% in 2001. Gross profit
margin decreased primarily because as sales decreased, fixed costs did not
decrease proportionally.

     Cost of sales for the Distribution segment was $13.2 million in 2002. Gross
profit margin was 28% in 2002. A&B Bolt's gross profit margin was 27% for the
six months ended June 30, 2001.

     Selling, General and Administrative Expenses. On a consolidated basis,
selling, general and administrative expenses increased $8.1 million in 2002
compared to 2001, primarily as a result of the merger with IHI in December 2001.
The increase was net of a decrease in the amortization of goodwill of $0.9
million. Selling, general and administrative expenses as a percentage of sales
were 21% for both 2002 and 2001.

     Selling, general and administrative expenses for the Pressure Control
segment increased $1.4 million in 2002 compared to 2001 primarily as a result of
the merger with IHI in December 2001. The increase was net of a decrease in the
amortization of goodwill of $0.7 million. As a percentage of sales, selling,
general and administrative expenses remained comparable at 18% in 2002 and 17%
in 2001.

     Selling, general and administrative expenses for the Products segment
increased $2.8 million in 2002 compared to 2001, primarily as a result of the
merger with IHI in December 2001. The increase was net of a decrease in the
amortization of goodwill of $0.2 million. As a percentage of sales, selling,
general and administrative expenses decreased from 21% in 2001 to 16% in 2002.
In 2002, the combined operating units have lower selling, general and
administrative cost structures than in 2001.

     Selling, general and administrative expenses in the Distribution segment
were $4.2 million in 2002. On a pro forma basis, Selling, general and
administrative expenses were $4.4 million for A&B Bolt in the same quarter 2001.
However, as a percentage of sales, selling, general and administrative expenses
were 23% in 2002 compared to 19% in 2001. This increase is attributable to a
decline in sales due to market conditions while fixed costs remained relatively
constant.

     Selling, general and administrative expenses for Corporate operations
increased $1.3 million, or 118%, in 2002 compared to 2001. This increase was
primarily attributable to the merger with IHI in December 2001 and the addition
of corporate staff and related expenses resulting from the Company's growth and
the costs associated with being a publicly traded company.

     Interest Expense. On a consolidated basis, interest expense decreased $0.4
million or 17% in 2002 compared to 2001. In connection with the merger with IHI
in December 2001, First Reserve Fund VIII converted $24 million in 12%
convertible notes to equity. Additionally, the Company completed a comprehensive
debt refinancing, lowering the Company's effective borrowing rate. On March 27,
2002, the Company sold 1,000,000 shares of its common stock at $10 per share to
its largest stockholder, First Reserve Fund VIII. The proceeds from this sale
were used to pay down debt.

     Interest Income. Interest income in 2002 was generated from seller notes
receivable that arose in conjunction with the disposal by IHI of several
business units just prior to the completion of the merger. Interest income in
2001 was not material.

     Income Taxes. Income tax expense for 2002 was $1.9 million compared to
$1.2 million in 2001. The effective tax rate for 2002 was 42% compared to 50% in
2001. For 2001, the tax rate in excess of the combined federal and state
statutory rates (approximately 39%) was primarily attributable to the
nondeductible portion of meals and entertainment expenses and the nondeductible
amortization of goodwill associated with the


                                       14
<PAGE>

acquisitions made before July 1, 2001. However, as a result of the
implementation of SFAS No. 142, beginning January 1, 2002, the Company no longer
amortizes goodwill. As a result, the Company's effective tax rate decreased in
2002.

     Net Income. On a consolidated basis, net income was $2.7 million in 2002
compared with $1.2 million in 2001 as a result of the foregoing factors.

LIQUIDITY AND CAPITAL RESOURCES

     At June 30, 2002, the Company had working capital of $28.9 million, current
maturities of long-term debt of $4.4 million, long-term debt of $31.3 million
and stockholders' equity of $128.8 million. Historically, its principal
liquidity requirements and uses of cash have been for debt service, capital
expenditures, working capital and acquisition financing, and its principal
sources of liquidity and cash have been from cash flows from operations,
borrowings under long-term debt arrangements and issuances of equity securities.
The Company has financed acquisitions through bank borrowings, sales of equity
(primarily to First Reserve) and internally generated funds.

     Net Cash Provided by Operating Activities. For 2002, net cash provided by
operating activities was $2.4 million compared to $0.8 million in 2001. Cash
provided by operations increased in 2002 as compared to 2001 because of an
increase in positive adjustments to net income for non-cash expenses, primarily
deferred taxes and amortization of deferred loan costs, offset by a net decrease
in cash provided by working capital accounts, primarily due to a reduction in
accounts payable and accrued liabilities.

     Net Cash Used in Investing Activities. Principal uses of cash are for
capital expenditures and acquisitions. Investing activities used cash of $2.0
million in 2002 compared to $17.1 million in 2001. For 2002 and 2001, the
Company made capital expenditures of approximately $2.1 million and $1.9
million, respectively.

     Net Cash Provided by (Used in) Financing Activities. Sources of cash from
financing activities include borrowings under the credit facilities and sales of
equity securities. Financing activities used net cash of $3.5 million in 2002
and provided net cash of $16.8 million in 2001. During 2002, the Company had
borrowings of $0.4 million under its credit facilities and long-term debt
compared to $17.5 million during 2001. During 2002, the Company had principal
payments of $13.9 million on its credit facilities and long-term debt compared
to $0.7 million in 2001. During 2002, the Company had proceeds of $10.0 million
from the sale of equity securities. These proceeds were used to reduce debt.

     Principal Debt Instruments. As of June 30, 2002, the Company had an
aggregate of $35.7 million borrowed under its principal bank credit facility and
debt instruments entered into or assumed in connection with acquisitions as well
as other bank financings. As of June 30, 2002, the Company had $19.8 million in
availability under its revolving credit facility; however, as a result of the
funded debt-to-EBITDA ratio covenant, the Company's actual availability was
limited to $4.1 million.

     The Company has a senior credit facility with Wells Fargo, N.A. and General
Electric Capital Corporation maturing December 17, 2004. The Company also has a
$12.0 million subordinated term loan with Wells Fargo Energy Capital, Inc.
maturing December 17, 2005. The senior credit facility includes a revolving
credit facility of the lesser of a defined borrowing base (based upon 85% of
eligible accounts receivable and 50% of eligible inventory) or $41.5 million, a
term loan of $16.5 million and an optional facility for up to an additional
$20.0 million in the form of a revolving credit commitment for future
acquisitions based upon specific criteria. The term loan is payable in equal
quarterly installments of $0.8 million commencing March 31, 2002. The applicable
interest rate of the senior credit facility is governed by our
trailing-twelve-month funded debt-to-EBITDA ratio and ranges from prime plus
1.25% or LIBOR plus 2.25% to prime plus 2.00% or LIBOR plus 3.00%. At June 30,
2002, the senior credit facility bore interest at libor plus 2.75%, with
interest payable quarterly. The Company is required to prepay the senior credit
facility under certain circumstances with the net cash proceeds of asset sales,
insurance proceeds, equity issuances and institutional debt, and commencing
April 2003, if, and for so long as, its funded debt-to-EBITDA ratio is 2.25 to 1
or greater, with 50% of excess cash flow as determined under the senior credit
agreement. The senior credit facility provides, among other


                                       15
<PAGE>

covenants and restrictions, that the Company comply with certain financial
covenants, including a limitation on capital expenditures, a minimum fixed
charge coverage ratio, minimum consolidated tangible net worth and a maximum
funded debt-to-EBITDA ratio. As of June 30, 2002, the Company was in compliance
with the covenants under the senior credit facility. The senior credit facility
is collateralized by substantially all of the Company's assets.

     The subordinated term loan bears interest at a fixed rate of 9.5% with
interest payable quarterly. The principal balance is due in full on December 17,
2005. The effective interest rate, including amortization of loan costs, is
10.6%. The subordinated term loan provides, among other restrictions, that the
Company maintain a minimum fixed charge coverage ratio and a maximum funded
debt-to-EBITDA ratio. Under the terms of its senior credit facility, the Company
is not currently permitted to make principal payments on the subordinated term
loan. As of June 30, 2002, the Company was in compliance with the covenants
under the subordinated term loan. The subordinated term loan is collateralized
by a second lien on substantially all of the Company's assets.

     Management believes that cash generated from operations and amounts
available under its senior credit facility and from other sources of debt will
be sufficient to fund existing operations, working capital needs, capital
expenditure requirements and financing obligations. Management also believes any
significant increase in capital expenditures caused by any need to increase
manufacturing capacity can be funded from operations or through debt financing.

     The Company intends to pursue additional acquisition candidates, but the
timing, size or success of any acquisition effort and the related potential
capital commitments cannot be predicted. The Company expects to fund future cash
acquisitions primarily with cash flow from operations and borrowings, including
the unborrowed portion of its senior credit facility or new debt issuances, but
may also issue additional equity either directly or in connection with an
acquisition. However, there can be no assurance that acquisition funds will be
available at terms acceptable to the Company.

FORWARD-LOOKING INFORMATION AND RISK FACTORS

     Certain information in this Annual Report on Form 10-Q includes
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can
identify these forward-looking statements by the words "expects," "projects,"
"believes," "anticipates," "intends," "plans," "budgets," "predicts,"
"estimates" and similar expressions.

     The Company has based the forward-looking statements relating to its
operations on its current expectations, and estimates and projections about the
Company and about the industries in which it operates in general. These
statements are not guarantees of future performance and involve risks,
uncertainties and assumptions that the Company cannot predict. In addition, many
of these forward-looking statements are based on assumptions about future events
that may prove to be inaccurate. Actual outcomes and results may differ
materially from what the Company has expressed or forecast in the
forward-looking statements.

THE COMPANY WILL FACE SIGNIFICANT CHALLENGES IN INTEGRATING ITS OPERATIONS, AND,
AS A RESULT, MAY NOT REALIZE THE BENEFITS OF CONSOLIDATION, SUCH AS REVENUE
ENHANCEMENT THROUGH CROSS-SELLING OPPORTUNITIES, IMPROVED MARGINS AND CORPORATE
COST REDUCTIONS.

     Integrating operations and personnel combined as part of the merger with
IHI will be a complex process, and management cannot be certain that the
integration will be completed in a timely manner or that the anticipated
benefits of the merger will be achieved. Successful integration will require,
among other things, the integration of finance, human resources, operations and
marketing groups and the coordination of the Company's information systems. The
diversion of management's attention and any difficulties encountered in this
integration process could cause the disruption of, or a loss of momentum in, the
activities of the Company's business.


                                       16
<PAGE>
BECAUSE THE COMPANY DEPENDS ON THE OIL AND GAS INDUSTRY, A DECLINE IN OIL AND
GAS PRICES OR A DECREASE IN INDUSTRY ACTIVITY WILL NEGATIVELY IMPACT ITS
PROFITS.

     The Company is, and will continue to be, dependent upon the oil and gas
industry and the level of oil and gas exploration and production. The level of
exploration and production depends upon the prevailing view of future product
prices. Many factors affect the supply and demand for oil and gas and therefore
influence product prices, including:

     o the level of production from known reserves;

     o the level of oil and gas inventories;

     o the cost of producing oil and gas;

     o the level of drilling activity;

     o worldwide economic activity; and

     o environmental regulation.

     If there is a significant reduction in demand for drilling services, in
cash flows of drilling contractors or production companies or in drilling or
well servicing rig utilization rates, then demand for the Company's products
will decline.

THE OILFIELD SERVICE INDUSTRY IN WHICH THE COMPANY OPERATES IS HIGHLY
COMPETITIVE, WHICH MAY RESULT IN A LOSS OF MARKET SHARE OR A DECREASE IN REVENUE
OR PROFIT MARGINS.

     The oilfield service industry in which the Company operates is highly
competitive. Many of its competitors have greater financial and other resources
than it does. Each of its operating units is subject to competition from a
number of similarly sized or larger businesses. Factors that affect competition
include price, quality and customer service. Strong competition may result in a
loss of market share and a decrease in revenue and profit margins.

THE COMPANY'S INSURANCE COVERAGE MAY BE INADEQUATE TO COVER CERTAIN CONTINGENT
LIABILITIES.

     The Company's business exposes it to possible claims for personal injury or
death resulting from the use of its products. The Company carries comprehensive
insurance, subject to deductibles, at levels it believes are sufficient to cover
existing and future claims. However, the Company could be subject to a claim or
liability that exceeds its insurance coverage. In addition, the Company may not
be able to maintain adequate insurance coverage at rates it believes are
reasonable.

THE COMPANY'S OPERATIONS ARE SUBJECT TO REGULATION BY FEDERAL, STATE AND LOCAL
GOVERNMENTAL AUTHORITIES THAT MAY LIMIT OUR ABILITY TO OPERATE OUR BUSINESS.

     The Company's business is affected by governmental regulations relating to
its industry segments in general, as well as environmental and safety
regulations that have specific application to its business. While management is
not aware of any proposed or pending legislation, future legislation may have an
adverse effect on its business, financial condition, results of operations or
prospects.

     The Company is subject to various federal, state and local environmental
laws, including those governing air emissions, water discharges and the storage,
handling, disposal and remediation of petroleum and hazardous substances. The
Company has in the past and will likely in the future incur expenditures to
ensure compliance with environmental laws. Due to the possibility of
unanticipated factual or regulatory developments, the amount and timing of
future environmental expenditures could vary substantially from those currently
anticipated. Moreover, certain of our facilities have been in operation for many
years and, over that time, the Company and


                                       17
<PAGE>

other predecessor operators have generated and disposed of wastes that are or
may be considered hazardous. Accordingly, although the Company has undertaken
considerable efforts to comply with applicable laws, it is possible that
environmental requirements or facts not currently known to management will
require unanticipated efforts and expenditures that cannot be currently
quantified.

THREE OF THE COMPANY'S DIRECTORS MAY HAVE CONFLICTS OF INTEREST BECAUSE THEY ARE
ALSO DIRECTORS OR OFFICERS OF FIRST RESERVE CORPORATION. THE RESOLUTION OF THESE
CONFLICTS OF INTEREST MAY NOT BE IN THE COMPANY'S OR ITS SHAREHOLDERS' BEST
INTERESTS.

     Three of the Company's directors, Thomas A. Denison, Joseph R. Edwards and
Ben A. Guill, are also current directors or officers of First Reserve
Corporation, which controls the general partner of First Reserve Fund VIII, L.P.
This may create conflicts of interest because these directors have
responsibilities to First Reserve Fund VIII and its owners. Their duties as
directors or officers of First Reserve Corporation may conflict with their
duties as directors of the Company regarding business dealings between First
Reserve Corporation and the Company and other matters. The resolution of these
conflicts may not always be in the Company's or its shareholders' best
interests.

THE COMPANY WILL RENOUNCE ANY INTEREST IN SPECIFIED BUSINESS OPPORTUNITIES, AND
FIRST RESERVE FUND VIII AND ITS DIRECTOR DESIGNEES ON THE COMPANY'S BOARD OF
DIRECTORS GENERALLY WILL HAVE NO OBLIGATION TO OFFER THE COMPANY THOSE
OPPORTUNITIES.

     First Reserve Fund VIII has investments in other oilfield service companies
that compete with the Company, and First Reserve Corporation and its affiliates,
other than T-3, may invest in other such companies in the future. The Company
refers to First Reserve Corporation, its other affiliates and its portfolio
companies as the First Reserve group. The Company's certificate of incorporation
provides that, so long as First Reserve Corporation and its affiliates continue
to own at least 20% of the Company's common stock, the Company renounces any
interest in specified business opportunities. The Company's certificate of
incorporation also provides that if an opportunity in the oilfield services
industry is presented to a person who is a member of the First Reserve group,
including any individual who also serves as First Reserve Fund VIII's director
designee of the Company:

     o    no member of the First Reserve group or any of those individuals will
          have any obligation to communicate or offer the opportunity to the
          Company; and
     o    such entity or individual may pursue the opportunity as that entity or
          individual sees fit,

unless:

     o    it was presented to a member of the First Reserve group in that
          person's capacity as a director or officer of T-3; or
     o    the opportunity was identified solely through the disclosure of
          information by or on behalf of T-3.

These provisions of the Company's certificate of incorporation may be amended
only by an affirmative vote of holders of at least 80% of its outstanding common
stock. As a result of these charter provisions, the Company's future competitive
position and growth potential could be adversely affected.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

     Market risk generally represents the risk that losses may occur in the
value of financial instruments as a result of movements in interest rates,
foreign currency exchange rates and commodity prices.

     The Company is exposed to some market risk due to the floating interest
rate under its revolving credit facility and certain of its term debt. As of
June 30, 2002, its revolving credit facility had a principal balance of $5.1
million and its variable long-term debt had a principal balance of $14.9
million, all with interest rates that float with prime or LIBOR. A 1.0% increase
in interest rates could result in a $0.2 million annual increase in interest
expense on the existing principal balances.


                                       18
<PAGE>


                                     PART II

ITEM 1. LEGAL PROCEEDINGS

     The Company is involved in various claims and litigation arising in the
ordinary course of business. While there are uncertainties inherent in the
ultimate outcome of such matters and it is impossible to currently determine the
ultimate costs that my be incurred, the Company believes the resolution of such
uncertainties and the incurrence of such costs should not have a material
adverse effect on its consolidated financial condition or results of operations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     a. The Annual Meeting of Shareholders of the Company was held May 29, 2002.

     b. The following person was elected at that meeting as a Class I director
to serve until his successor is elected and qualified:

        Name of Nominee                       Number of Votes
        ---------------                       ---------------
                                            For          Withheld
                                            ---          --------
        Joel V. Staff                   9,488,942         668,853

     c. The 2002 Stock Incentive Plan was approved by the shareholders as
follows:

        For             Against           Abstain         Broker Non-Votes
        ---             -------           -------         ----------------
     8,727,141          772,332            2,595              655,727

ITEM 5. OTHER INFORMATION

     None

ITEM 6. EXHIBITS

     a. Exhibits

    Exhibit Number   Identification of Exhibit
    --------------   -------------------------

         99.1       Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
                    Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
                    (Chief Executive Officer)

         99.2       Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
                    Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
                    (Chief Financial Officer)

     d. Reports on Form 8-K

          On June 29, 2002, the Company filed a current report on Form 8-K dated
     June 24, 2002 disclosing in Item 4 that the Company had dismissed Arthur
     Andersen LLP and appointed Ernst & Young LLP as its independent auditors
     for fiscal year 2002.



                                       19
<PAGE>



                                   SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 13TH DAY OF AUGUST,
2002.

                                        T-3 ENERGY SERVICES, INC.

                                        By: /s/ STEVEN J. BRADING
                                        ----------------------------------------
                                        STEVEN J. BRADING (CHIEF FINANCIAL
                                        OFFICER AND VICE PRESIDENT)

                                        By: /s/ MICHAEL T. MINO
                                        ----------------------------------------
                                        MICHAEL T. MINO (CORPORATE
                                        CONTROLLER AND VICE PRESIDENT)





                                       20
<PAGE>




                                 EXHIBITS INDEX


<Table>
<Caption>
        Exhibit
        Number      Identification of Exhibit
        -------     -------------------------

<S>                 <C>
         99.1       Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
                    Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
                    (Chief Executive Officer)

         99.2       Certification Pursuant To 18 U.S.C. Section 1350, As Adopted
                    Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
                    (Chief Financial Officer)
</Table>